There seems to be a lot of arguments on shares v property on this thread. Arguments about the relevant superiority of asset classes are fairly pointless. Both have booms & busts & varying yields, just like all investments. I think the main things to keep in mind are your risk tolerance, your level of financial education and your trading frequency.
If you're a "set-and-forget" type, then you're probably better off in property. They call mortgages "forced savings for dumb people". You're forced to put money into something every month and it'll make money over the long term. But so would a savings account.
If you're an educated active trader, and can handle a bit of risk, then you're probably better off in shares. Buy on dips and sell on peaks. Or learn how to short-sell. You can make money when shares go up, or down, if you educate yourself a bit. Then a share crash becomes just another money-making opportunity.
Or in a booming housing market you can mix the two, and trade properties. "Flippers" made great money on property during the boom. Mate bought Gold Coast property on-line and sold six months later for $50k net profit. Besides a photo, he never even saw it.
But you don't really hear about "flippers" anymore. Not sure why?
While the property bubble here hasn't burst, sounds like its deflating now. Got mates offering cash bids with 3-month windows on properties at 20% discounts to advertised price. Amazing how keen RE agents are (esp. on properties on market for 6 months+), despite stubborn/romantic vendors still holding out.
Guess that pretty much sums up Aust property market at the mo.
If a house isn't paid off within 5-10years then it's a bad long term investment as over the 25year period of making payments off, you've paid a couple 100k in interest alone
if your paying $400 a week rent for 25years ( with zero inflation)
you will pay $520,000 in rent, I will take the interest thanks,
despite stubborn/romantic vendors still holding out.
Guess that pretty much sums up Aust property market at the mo.
say a $450000 house rents for $400 per week (as is one I am involved in)
450k *7% interest over 25 years
= $787500.
So at the moment, I'd take renting.
MUCH different to, for example, a house purchased in 1999 for $150000 which rented for 200 per week.
Once things start to come closer to realistic valuations and long term trends, then I would be happier to believe that owning in better than renting, but at the moment, the argument is difficult to make.
I don't know, whats the chart tell ya.:
Hey Bud,
Not looking for a long winded exchange, But.
It wouldn't be $787,000 interest because the loan decreases as you pay off the loan.
and also as I eluded to earlier, $400 a week rent would increase significantly over 25 years with inflation.
But yes in a world where inflation didn't exist and people didn't pay off the principle of the loan ever you would be better renting.
If you paid off the principal, then it would be significantly more than $400 per week.
You don't really gain anything financially unless you sell and live in a caravan. It is a material gain through ownership while forking out hundreds of thousands in interest. Catch 22 with renting and saving. Interest on loan is dead money and so is rent.
The obviousness is the sell price appreciates on the house but you have a house that is 25 years older and it will cost more to sell and upgrade to a modern house because everyone elses house has appreciated as well..
consider the following and fill in the blank.
40 years of inflation adjusted rental payments = (blank)
Cost of home + 25years interest + 25 years rates maintaince - sale price of home inflation adjusted = (blank)
Now thats sort of muddying up the waters.
consider the following and fill in the blank.
40 years of inflation adjusted rental payments = (blank)
Cost of home + 25years interest + 25 years rates maintaince - sale price of home inflation adjusted = (blank)
What, and it doesn't cost more to rent a better home?
Remember any maintaince costs, rates, insurance etc.etc is covered by rent.
Renting a house = ever increasing amounts of dead money due to inflation adjusted rent
renting money over 25 years = ever decreasing interest payments, that are made easier to pau due to inflation.
haha Think I said this a while ago but I have friends that bought a good 5 - 8 yrs ago and only manged to pay off something like 20k from the loan and the rest is all interest payments. Needless to say they have no savings because everything goes off to pay the bank....
They got suckered in by exactly the same pitch that Tyson is spinning up
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